Once a trendy beverage, Jones Soda fights to convince skeptics it can ‘win again’

Source: fooddive.com

When Mark Murray took over as CEO of quirky beverage maker Jones Soda last year, the seasoned 61-year-old food executive would frequently get asked by friends and business associates a simple question: Why?

Murray, who was “retired” but spent his time doing consulting work and reviewing businesses for private equity firms to “kind of stay in the game,” confesses he “wasn’t really anxious to jump into anything” after nearly 40 years in the food space working for companies including Campbell Soup and Kraft Foods. Things quickly changed last April when Jamie Colbourne came on as interim CEO amid an executive shakeup at the struggling 25-year-old company. Colbourne, now Jones’ chairman, asked his friend and business partner Murray to help. 

“Some of the people would ask me, ‘What are you doing this for? It seems so small, ‘ ” Murray said in an interview.

But after several months working with Jones — first as a consultant starting that May, then as company president before adding the CEO role in December — he was convinced the once-trendy beverage upstart known for its creative flavors and hip labels could regain the notoriety that made it a trendy offering with consumers more than a decade ago.

“This is a really good group of people, and they haven’t been winning for a very long time but they can win with the right guidance and the right leadership,” Murray said. “We’re going to stop the bleeding and this is the path forward in getting people to believe.”

Jones Soda has touted itself as a maker of premium soda, with many of its offerings in unique flavors that Big Soda wouldn’t touch, including Blue Bubblegum, Pineapple Cream and Strawberry Lime. Its bottles’ labels are adorned with photographs submitted by consumers, creating an emotional connection to the brand that Murray said separates Jones from its large cola competitors. 

“After my second day on the job [as a consultant], I remember calling [Colbourne] and saying, ‘This brand is different,” he said. ” ‘I can’t think of any other brand that I’ve been a part of that actually welcomes the consumers in and allows them to participate in terms of building the brand image.’ ” 

Courtesy of Jones Soda

 

But the uniqueness of its offerings hasn’t been enough to help Jones Soda in a world where consumer tastes and preferences are changing — specifically, the push to cut sugar intake. Meanwhile, the $32 million company finds itself competing against soda titans like Coca-Cola and PepsiCo, each around $200 billion in value. In 2007, Jones Soda’s stock price approached $30 a share. It has since fallen to just 50 cents. 

“It was a rising star, a decade or 15 years ago. Now, it’s just trying to try to dig itself out,” said Anthony Campagna, director of research at ISS ESG. “It kind of lost its competitive edge as more and more players got into the market and the very, very large players in the space adapted [by creating] new brands or competitive offerings that just eroded market share.”

After taking over, Murray said he met with customers, distributors and brokers to learn more about their perception of Jones. The consensus: Jones was a great company that had lost its way when it came to innovation and investing in its brand. 

“Now we’re in front of the customers and say, ‘We’re back, and we’re serious about being back,’ ” he said.

Rethinking product innovation

Since Murray started working with the company, he debuted new cost and management controls, a revised sales strategy focusing on core product offerings and a new three-year strategic plan that included expansion into foodservice and club channels like Costco and Sam’s Club.

Murray said Jones had a minimal presence in restaurants and club stores before he arrived, but these categories represent “tremendous growth opportunities that help us diversify our business.”

Restaurants, in particular, were a familiar channel for Murray, who worked closely with them during his 22-year stint at Kraft. Within a few weeks after taking over as president in September, Jones hired a broker to reach out to the top 200 restaurant chains in the world. It later identified 35 to 40 that could build their beverage sales working with Jones, while simultaneously giving the soda maker a bigger presence in a more profitable category. 


“This is a really good group of people, and they haven’t been winning for a very long time but they can win with the right guidance and the right leadership. We’re going to stop the bleeding and this is the path forward in getting people to believe.”

Mark Murray

CEO, Jones Soda


Even in grocery stores, where Jones gets the lion’s share of its revenue, the company is doubling down on expansion and identifying gaps in its distribution. It’s aiming to convince retailers to carry its top five SKUs instead of just two that many currently stock. It is also building out its presence in the South, Southeast and Northern California — the latter just a few hundred miles from its headquarters in Seattle — all regions the company neglected in the past.

Jones has rolled out a mixer pack geared toward cocktails that would give it a presence in retail beyond the soda aisle, and provide another source of revenue during the winter months when sales slow. The soda maker also is more proactively managing the shelf where its flavors are stocked to make sure the right mix of product is being carried before retailers decide to make changes.

There’s evidence that Murray’s efforts to revive the craft soda maker are starting to pay off. In the last three quarters, Jones has increased sales and trimmed losses. In the fourth quarter alone, revenue increased 14% to $2.5 million from the same period a year following six consecutive quarters of declines. Losses for the last three months of 2020 improved to $918,000 from $930,000 a year earlier.

Campagna said while Jones “has a pretty steep hill to climb on their way to breakeven or profitability,” the soda maker could benefit from the nostalgia wave that has gained momentum during the recent pandemic or its push to get its products into more stores and increase the offerings sold in those that already stock it. If Murray is successful in turning around the company — a task that has flummoxed prior CEOs — it’s possible Jones could become an attractive acquisition target.

“The forward outlook certainly is not all sunshine and roses, but they have opportunities to continue to improve things off of a very low and poor base,”  Campagna said.    

Even as consumers cut back on sugar intake, Murray remains confident there will always be room for indulgent products like a craft soda. Soon after joining the company as a consultant, he was participating in a taste test of a new version of its iconic Jones Root Beer that would cut the calorie count from 180 to 100.

Murray, convinced Jones’s classic root beer was better than the competition, recalled the new variety fell flat on taste. It didn’t take long after becoming CEO before he shut down work on the low-calorie drink.

“I said, ‘You have a winner here. You have a winner that we just cut it against all the competition. Is somebody really serious about ripping out the calories and losing out on the taste side of it?’ It makes no sense to me,” Murray said. “These are indulgent products and they should be treated like a treat.” 

Watching the bottom line

Similar to other CEOs tasked with orchestrating a turnaround, Murray’s goal is not only to turn Jones into a profitable company but also one that can stay in business long enough for that to happen. When he first came on as a consultant, the first thing Murray and others did was stabilize Jones’s spending.

“We have to be very focused and very disciplined in terms of what we’re doing,” Murray said. “We don’t have a lot of money, so everything we spend we have to make sure we’re maximizing the efforts of every dollar.”

Courtesy of Jones Soda

 

To do that means not spending $40,000 at a trade show for a 20-foot booth in favor of marketing partnerships, such as one Jones Soda inked in May 2020 with skateboarder Tony Hawk. And instead of a national advertising campaign, Jones is investing in social and digital media to build brand awareness, something the company had never done before.

Murray is only four months into his tenure as CEO and a year into his time with the company, but he is optimistic the sweeping changes put in place will position the soda maker to celebrate another 25 years in 2056, even if his work to overhaul Jones is just beginning to bear fruit. The company is continuing to churn out novel flavors — about one every six months. And, it “is locked and loaded and ready to go” on a CBD offering once it gets more regulatory clarity from the FDA, Murray said.

“I sit here — and it may sound a little corny, man,” Murray said, “but sometimes I just sit and smile with the good positive things we’ve been able to do in a very short period of time.”

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